What will an increased tax on alcohol really cost?

Many years ago I was lucky enough to have summer jobs working as a busboy in the Park Schenley restaurant in Pittsburgh. This summer job allowed me to earn the $600 necessary - with generous financial aid - to attend Northwestern University for my undergraduate degree. It was a tough job. On Satudays we started set-up at 10 am and were not finished until clean-up at 2 am Sunday morning. There was a break from 3pm-5pm when I took a nap in the Carnegie public library.

Good times. And I was very fortunate because at that time the unemployment rate in Pittsburgh was about 25%.

Fast forward to the present. I've been going to Zipp's liquors for many years and have been very impressed by the hard work put in by Andrew and Jennifer Schoenzeit, a brother and sister team who are the owners of Zipp's, a liquor store on Franklin Avenue in the Seward neighborhood. Zipp's is an excellent example of a locally owned community business. Their prices are reasonable, they have a decent selection of wines, and trustworthy people to help you in selecting the right wine.

I have been rather confused lately in trying to figure out what would be the actual effect of the proposed increase in alcohol tax being discussed at the state capitol. Some say that it will only be seven cents per glass of beer, but others claim that it will be a lot more. When I asked about this Ms. Schoenzeit provided me with some information that is quite striking concerning current alcohol taxes in Minnesota and in other US locations.

(Used with permission)

The striking thing about this illustration is the high penalty that alcohol vendors in Minneapolis pay compared to the rest of the state. But even the tax outside of Minneapolis is quite high compared to our neighbors and places in the rest of the country.

For example:

(used with permission)

So my point is: the taxes paid on alcohol are ALREADY higher in Minnesota than in other locations. Any further increase should be very small and that does not appear to be the case.

Some other things to consider include whether a tax is progressive or not. If you can afford Veauve Clicquot the additional cost of the tax is probably not going to affect your decision to purchase it. However, if you are a beer drinker of modest means an increase in cost of, say, two dollars for a twelve pack may change your choice of beer brand. That is why in graduate school, I drank Buckhorn, the absolutely cheapest beer available at the time. Nowadays, my favorite is Summit.

The great increase in quality of craft beers like Summit has been a boon to new businesses including breweries in the state. Even local restaurants like the Birchwood now serve beer and wine. And I have yet to see anyone in the Birchwood who had too much to drink.

So I hope that our state legislators and the Governor will keep these points in mind while trying to decide what taxes they raise. Unintended consequences of this action may have a devastating effect on businesses that depend on alcoholic beverages as part or all of their revenue.

Bill Gleason is an Associate Professor at the University of Minnesota in the Department of Laboratory Medicine and Pathology. He's also a fellow at the U's Supercomputer Institute. Read more about Gleason.

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